No one wants to think about their eventual death, but it’s important to have some kind of plan in place, so your family isn’t confused after your passing. Estate planning allows you to clearly detail how you want your belongings handled after your death, taking the pressure and stress off of your loved ones, so they can focus on grieving. If you would like to learn more, check out these four important parts of estate planning.
Last Will and Testament
A last will and testament is a document used after a person’s death to detail how they want their assets distributed. The will should also name the executor who manages the will to ensure everything is distributed properly. The biggest benefit of having a last will and testament is that it prevents confusion and arguments among your family members.
If you don’t have a will, the state automatically becomes the executor of your estate, and they may not make the right decisions. For example, in most cases, your spouse will get most/all of the assets after your passing (if there is no will). However, you may have wanted to leave some to your kids, parents, siblings, etc. If your spouse doesn’t know your wishes or they choose not to share the assets, it may lead to a long, expensive court fight.
A last will and testament will detail how you want your assets distributed, but there are other ways you can designate beneficiaries. You can add beneficiaries to insurance policies, bank accounts, retirement accounts, savings bonds, and other financial assets. Even if you don’t have a last will and testament, these can be used to properly distribute some of your assets.
Depending on your preferences and the type of asset, you may have to choose between pay-on-death (POD) and transfer-on-death (TOD). POD assets will pay your beneficiary cash money upon your death, and TOD assets will automatically transfer to your beneficiary upon your death. Therefore, they won’t get money, but they officially own the asset and can do with it as they see fit.
Power of Attorney
Estate planning isn’t just about planning for after your death; you need to consider what will happen if you become incapacitated and are no longer capable of making decisions and/or handling your finances. This is where a durable power of attorney (POA) can help. A durable POA gives someone else the ability to make medical decisions on your behalf. You can also allow them to take control of your finances.
A durable POA does not go into effect until you are deemed incapacitated. You have the option to list a specific doctor to provide the diagnosis, or you can require that two doctors need to agree on your condition for the POA to go into effect. After your passing, the POA is terminated, so you still need to ensure you have a last will and testament and beneficiary designations.
Letter of Intent
A last will and testament largely focuses on how you want your assets distributed after your death, but you may have other wishes you want to have fulfilled. Therefore, you may want to include a letter of intent. Many people use letters of intent to plan their own funeral, including the type of music, the type of flowers, etc.
Of course, you can use a letter of intent for just about anything, including social media accounts, email accounts, passwords, personal belongings, etc. It’s also useful to include all the information your family will need to locate all your assets after death, such as your life insurance carrier and account information.
Don’t let the courts decide how your assets should be distributed after your death, and don’t leave your loved ones confused and angry at each other. Estate planning is essential to ensure a smoother transition for your loved ones after your passing. For more information about estate planning, contact us at The Madden Law Firm.